Prevention and adaptation to diversified risks in the seaport–dry port system under asymmetric risk behaviors: Invest earlier or wait?

The special geographical locations and socioeconomic functions of seaports and dry ports in the global trading system render them vulnerable to diversified risks. Targeted preventive and adaptive investments can reduce the probability and potential damage of corresponding risks. This study proposes a two-period game to explore the scale and timing of prevention and adaptation by seaport and dry port authorities regarding regular and disruption risks in a competitive environment under ambiguity and asymmetric risk behaviors. The results show that risk aversion increases prevention and adaptation while risk probability ambiguity aversion decreases prevention and adaptation under the effect of information accumulation. Under risk aversion, early prevention and late adaptation are best for port authorities, whereas waiting until the next period to invest is a better option in regard to ambiguity aversion as long as the ambiguity of risk probability can be reduced through information accumulation. Moreover, we extend the risk sensitivity and probability ambiguity models to seaports and dry ports that cooperate and exhibit a leader-follower relationship. Our analysis shows that the cooperative relationship leads to the free-rider effect among port authorities, while the leader-follower relationship enables the seaport and dry port authorities to achieve a Nash equilibrium when choosing early prevention or late adaptation. The findings offer significant economic and managerial insights for the decision-making and policy-making of ports and government authorities.